Why Groupon is a hot buy

Google is reportedly the latest company interested in grabbing Groupon -- and for good reason.

By Kim Peterson Nov 19, 2010 2:34PM
Save on shopping © Photodisc / Getty ImagesGroupon is becoming one of the hottest potential acquisitions out there -- and Google (GOOG) may be first in line to buy.

AllThingsD reports that Google is in discussions with Groupon about a deal -- at a price "well above" the $2 billion to $3 billion figure thrown around last month when Yahoo(YHOO) supposedly had an interest.

What makes Groupon so hot, any why would Google and Yahoo be interested? Too many reasons to count, but let's go over a few:

Revenue. Groupon is still relatively new but was profitable within months and now reportedly pulls in more than $50 million a month in sales, AllThingsD reports.

Local advertising. Ah, the holy grail in the online advertising world. Groupon dominates the local advertising market, offering daily discounts that are often so popular that restaurants and stores get bombarded with business. Post continues after video:
Local companies are so desperate for that deluge of customers that they'll happily do business with Groupon. And that's a source of local advertising that Google and Yahoo would love to have.

Excitement. Groupon is exciting, and it will get the little shopping demon inside of you revved up fast. It offers a today-only, crowd-centric super-discount that makes you want things you didn't even know you wanted.

A social phenomenon. Groupon deals work only when a certain number of people sign up, an ingenious twist. People talk about Groupon, they forward e-mail from the company, and they get each other to sign up.

Google has already made huge strides in local advertising. It sells keywords to florists, mechanics and restaurants that want to show up in your search. It now wants user reviews of local establishments. It's done a nice job adding local businesses to Google Maps.

What would Groupon bring to the table? Larry Dignan at ZDNet describes it nicely: A local restaurant can find a nice map and directions on Google, monitor user reviews and even offer a coupon for drinks or a discount. The restaurant can go a step further and offer a "deal of the day" to really bring in the crowds.

Groupon may take until the end of the year to consider an offer from Google, Bloomberg reports. Negotiations with Yahoo have failed -- probably because Yahoo just didn't have the money that Groupon is looking for. Google does.

AllThingsD also mentions that aside from Google, only Microsoft (MSFT), Amazon (AMZN) and eBay (EBAY) could afford to buy Groupon. Of all of those, a Google acquisition makes the most sense. (Microsoft owns and publishes MSN Money.)



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